Local officials fight over property tax money

Practically every state worker may be facing a significant pay cut tonight. Late Thursday afternoon, Governor Arnold Schwarzenegger (R) of California, proposed an across the board, five percent pay cut for state employees, to help close the looming $24 billion deficit.

Another round of state worker pay cuts is part of a $3 billion package of deficit reducing solutions the governor's office will be releasing on Friday. Even with that, Governor Schwarzenegger says he'll still need to borrow $2 billion from local cities and counties to help balance the state budget, but they can hardly afford it.

Those property taxes you pay on your home are supposed to fund local services, like public transit and law enforcement. So you can see why local officials are begging Sacramento lawmakers to reject Governor Schwarzenegger's plan to borrow $2 billion of that from them to help balance the state budget.

"What we're asking you to do is not take our money and to balance the budget with the scope of your own resources," says Dan Carrigg, from the League of California Cities.

But with declining tax revenue, borrowing is one of the few options California has left to address the ever-growing deficit. Large cities would be hit the hardest. San Francisco would temporarily lose $62 million, San Jose nearly $13 million, and Oakland more than $6 million.

"For city police who do most of the public safety, in a global sense, we are really putting public safety at risk," says John Lovell, from the California Police Chiefs Association.

And counties don't like the alternative when they run out of money for social services.

"The people we cannot help in the Health and Human Services or the mental health department, we will have to put in jail," says Kim Vann, a Colusa County Supervisor.

Public transit doesn't know what it'll do without the money.

"BART is looking at $250 million deficit over the next four years and we do not know, at this point, where we would come with the additional 8 percent loss," says Tim Schott, a Bay Area Rapid Transit lobbyist.

At one point, the hearing got testy when some lawmakers got fed up with local officials for calling the property tax money theirs.

"It's all the same and it's both of our monies. That's at stake here, not 'we', 'they', 'don't take,'" says State Senator Denise Ducheny (D) of San Diego.

Governor Schwarzenegger says given the state's horrible financial situation, everyone has to share in the pain.

"We could not see any way out without having some help from the locals. This is borrowing. They will get interest and they will get their money back," says Governor Schwarzenegger.

By law the state has three years to pay back that money. Meanwhile, Governor Schwarzenegger is planning to address the legislature next week in a rare joint session that will spell out exactly where California goes from here.